While in 2012 the Chinese economy slid into its slowest growth in more than a decade, Macao’s solid progress has led many to label the tiny special administrative region as China’s 'golden goose'. China’s National Bureau of Statistics says that the country's economy grew by 7.8% in 2012, whereas Macao’s economy expanded by 10% in the first three quarters of 2012, according to the Macao Trade and Investment Promotion Institute (IPIM). Deutsche Bank predicts that this figure could reach 15.4% in 2013.

Casino culture 


Located on the western side of the Pearl River Delta in the south of China, Macao’s rise from a former Portuguese enclave to one of China’s fastest growing cities has been down to its gaming industry. Home to the world’s largest gaming market, Macao’s FDI receipts have mainly come from its tourism and gaming sectors.  

“Macao has [one of] the highest GDP growth rates, even within Asia, reaching about 27.5% in 2010 and 21.9% in 2011,” says Richard Yue, CEO at ARCH Capital Management. Macao has a long-standing association with gaming and tourism, and in 2012 its gaming revenue grew to $37.4bn, according to Mr Yue.

A former Portuguese colony, Macao was handed back to China in 1999. "At the time, Macao’s gaming industry was [monopolised by] Sociedade de Turismo e Diversões de Macau [STDM], controlled by the Stanley Ho family," says Mr Yue. "In 2002 the [region’s] chief executive opened the industry up to the most experienced gaming operators in the world, many of which were from Las Vegas in US. Macao’s [annual] gaming revenue went from $2bn during the SDTM times, to $4bn by 2005, when the first [US-based] Sands Group casino opened. Today, at $37.4bn, Macao’s gaming revenue is six times [larger than] Las Vegas, which is a $6bn market.”

Tables turning

Macao’s tourism sector has directly benefited from its gaming industry, and data from greenfield investment monitor fDi Markets shows that between 2003 and 2012, out of a total of $7.7bn-worth of greenfield investments recorded, the hotels and tourism sector captured the lion’s share, with investments worth $4.1bn.

Although Macao’s gaming industry has experienced considerable success, questions have been raised on whether this reliance on gaming reveals an inability to diversify. A look at Macao’s leading investors, both from the US – Wynn Resorts, a hotel and casino developer, and Las Vegas Sands Group, an integrated resorts company – affirms its reliance on gaming and tourism. Between 2003 and 2012, their combined investments were worth $939.6m according to fDi Markets. “What Macao has to offer is tourism and gaming,” says Mr Yue. “It is a challenge to move away from that quickly given its small population base of only half a million people.”

Nevertheless, IPIM has worked to promote alternative sectors, and chief among this is the meetings, incentives, conferences and exhibitions (MICE) sector. The signing of the Convention and Exhibition Industry Co-operation Agreement in October 2012 by China’s secretary for economy and finance, Francis Tam Pak Yuen, and the vice-minister of commerce Jiang Yaoping, reveals that the national government is keen to diversify Macao’s sectors.

“The government is concerned that growth is [too] concentrated in gaming, and it wants Macao to diversify,” says Mr Yue. “It is going to take time but it will happen. If you look at the Las Vegas model, it has a fairly balanced MICE industry, in comparison to its overall gaming. People go and do their gambling, but often they go because they are also attending a huge convention or an exhibition.

"The government is aiming for that. Macao’s annual visitors’ arrival is about 30 million people and it only has an inventory of 26,000 hotel rooms. The operators are building more hotels. The government is also spending heavily on building better infrastructure including a 35-kilometre bridge link which will connect Macao with Hong Kong. Also, with all its casinos, Macao is getting very high end hotel rooms and that will support its MICE industry.”

According to Mr Yue, Macao will take an integrated approach to diversification, where the special administrative region’s new industries will evolve to support its tourism and gaming sectors. “There are other industries surrounding the gaming industry; however, they support it,” says Mr Yue. “[For example], ARCH Capital is a real estate private equity fund manager and we invested in a large track of residential land in Macao’s Cotai Strip, to support the growth of the new casinos being built [there]. We invested into the non-gaming part of Macao, because we wanted to get in early to participate in this growth story.”